Skip to main content

Seriously, It's Just a Number

Disclaimer; I’m going to address a financial subject that I find to be controversial. Here is it–the FICO score.

Huh?

It’s also referred to as a credit score. Now you get it. The fact that anyone needs to rely on one at all is up for debate, in my humble opinion, but that is not the subject of this post today. We are going to pretend for a minute that I really care about credit scores (which I don’t, and I’ll explain why) and all learn something together.

“A FICO score is a credit score created by the Fair Isaac Corporation” (thus FICO, their symbol on the New York Stock Exchange). “Lenders use borrowers’ FICO scores along with other details on borrowers’ credit reports to assess credit risk and determine whether to extend credit. FICO scores take into account data in five areas to determine creditworthiness: payment history, current level of indebtedness, types of credit used, length of credit history, and new credit accounts” (https://bit.ly/3zeBkcW).

I heard Dave Ramsey say something akin to this; the credit score grades your relationship with debt. Many companies, even ones that have no business doing so (like auto insurance companies and potential employers), in my opinion, “run your credit” to see if you are worthy of their time and attention. They don’t seem to understand that if you have zero debt and no credit accounts open, your credit score will be zero. Seeing a zero freaks them out, and they don’t know how to process it.

I could care less about my credit score because I have no intention of borrowing money from anybody ever again, not even for my next home purchase. But I digress…

Because MOST people have some form of debt and are caught up in the credit score merry-go-round, we must address the idea of credit scores. So, note to self, we should learn to care about our credit score and thus take care of our credit score. So, how do we go about it?

Check out annualcreditreport.com for reports from each of the three credit reporting companies. Make sure they are accurate. Reach out to them if they are not. Close old yet still open accounts with zero balances. Even consider freezing your credit since you are no longer relying on debt and, like me, don’t intend to borrow any more money. This will also help protect you from identity theft.

While I may not agree with the need for this rating system, I do understand that if you have one you want it to remain in good shape. So, take care of it. Rant over.

Comments

Post a Comment

Popular posts from this blog

Stack or Roll?

Last week I gave instructions to put your debts in order from the smallest balance owed to the largest balance owed. And, it is in this order that I intend to instruct you how to pay them off–you will pay the smallest balance first, and when that debt is paid in full, you combine that payment (that you are no longer paying because you are DONE with it) with the payment of the second smallest debt….you roll the first payment into the second debt. This allows payments to get larger and larger as you pay off creditors and is called debt snowballing . This system works for most people, is by far the easiest to understand, and allows you to see quick progress which is most likely to keep people motivated. But I would be remiss if I didn’t tell you there is another way to organize your debt, and that is by the percentage of interest you are paying–the creditor with the highest interest rate goes at the top of the pile, and you pay off that creditor first. When that debt is paid off, yo...
1 comment
Read more

Say "Ahh..."

I cannot believe that in all my months of blogging that I have not used–I checked–one of my most favorite quotes of all time. Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.” The gist of it is that it’s easier and cheaper to fix something small than it is once it grows too large. It sounds like Franklin’s original intent might have been health-related (think cancer), but it can be applied to anything that needs maintenance (think car problems). Your house is no different. Side note; if you are renting, you can thank your lucky stars at this point. Renters are not responsible for regular home maintenance. However, this is also one thing that potential home-owners don’t usually think about when they are getting “house-hungry” and “throwing their money away on rent.” If you have too much debt when you try to buy a home, you are probably asking for more financial trouble. Now, let us return to the subject at hand. Why this time of year? You ask? Well, t...
Post a Comment
Read more

Gifts that Matter

When I think about my childhood, there are a few events (some good, some not so good) that really stand out. These specific incidents made big impacts on me, so they really stuck. I bet you can say the same thing. These encounters, good and bad, help shape who we are. As parents, it is our job to teach our children to be honest, upstanding, contributing members of society. This does not happen by accident. Part of this process involves the experiences we give our children–we can orchestrate PEAK moments for our families that will leave lasting impressions on young, impressionable minds. What is a PEAK moment? According to de Jager Meezenbroek, Garssen, van den Berg, van Dierendonck, Visser, and Schaufeli in the Journal of Religion and Health , “Peak experiences are often described as transcendent moments of pure joy and elation. These are moments that stand out from everyday events.” Christmas offers an EXCELLENT opportunity to offer experiences that can become “PEAK moments” in ...
Post a Comment
Read more